Death and taxes may be certain — but in some cases, it is possible to put off paying your taxes.
Whether it’s audits, a lien against your home, or getting taken to tax court, dealing with the IRS can be an extremely stressful situation for individuals facing mounting tax debt.
That’s why it’s important to know your options if you find yourself unable to pay when it comes time to file.
“The IRS has several different ways [to put a halt on] your taxes, and that’s what some people call a hardship,” Rob Burnette, investment advisor and tax preparer at Outlook Financial Center in Troy, Ohio, told The Post. “It allows you to dodge the IRS fairly quickly.”
What is the IRS hardship program?
The IRS hardship program is a resource that gives taxpayers a “breather” by placing a temporary pause on collection activities.
“It’s basically, you don’t have the money. You literally do not have it,” Erica Sandberg, consumer finance expert at BadCredit.org, told The Post. “You’re not working. You have nothing you can sell. There’s no way you can get it.”
Typically, when an individual stops paying their taxes or alerts the IRS that they will not be able to pay, agents will try to find ways for you to send in that money – which can include phoning a friend or relative, selling your assets or even listing your property.
But taxpayers with a history of filing and paying on time can apply to take advantage of the hardship program during tough times.
The hardship program, also known as Currently Not Collectible (CNC) status, has an easy online application.
If approved, individuals will be granted a 180-day buffer period when tax collection will be placed on hold.
It’s important to note that during this time, the debt will continue to grow because it will still be subject to penalties and interest.
However, the hardship program allows taxpayers in good standing to escape harsher penalties and avoid getting chased down by the IRS.
Who qualifies for the IRS hardship program?
The IRS hardship program is meant for individuals in good standing who have historically paid their taxes on time – not so-called “tax dodgers,” Sandberg said.
Individuals who worked throughout 2024 but were laid off or lost their jobs, for example, would likely be a good fit for the program.
“You’ve made good on it before, so this is the IRS’ way of just giving you a break,” Sandberg told The Post.
Another ideal applicant for CNC status would be a self-employed individual who is experiencing a temporary disruption to cash flow.
Perhaps their vendors are withholding payment or missing deadlines, so they won’t make the April 15 tax deadline, but they know they can pay it off in June, Burnette said.
Taxpayers with a healthy payment history who have simply splurged too much would also be a good fit for the program.
“If they’re working for a company and they’re making a good salary, good wage, and they get overextended – they have the house that they can’t afford to impress the people they don’t know, likewise with vehicles,” Burnette told The Post.
When determining whether you qualify for the hardship program, the IRS will take a look at your income, if applicable, and your spending on necessities to determine whether you truly need an exemption.
They’ll also sift through your assets and equity, any medical bills and other debts, like student loans or credit card debt.
While it’s not a permanent solution and it doesn’t erase your debt, the hardship program can be a relatively painless program.
“As long as you have it paid within 180 days, then [the government is] still going to consider you a good and healthy taxpayer,” Burnette said.
What if I don’t qualify for the hardship program?
But the hardship program won’t work for everyone – certainly not for those who need longer than 180 days, owe more than $50,000 or have a history of not paying their taxes on time.
If you know you need a lot longer to pay off your tax debt, say three years for example, then you should consider looking into the IRS installment program, Burnette said.
Like the hardship program, you will continue to accrue interest and penalties on your tax debt, but you’ll be allotted more than 180 days and it “still puts you in the category of meeting your tax obligations. The IRS isn’t going to attach any liens or strict enforcement actions,” Burnette told The Post.
However, an extended deadline might not be enough for some individuals owing huge amounts of tax debt.
In this case, you’ll have to turn to the IRS for an offer in compromise – a completely separate beast from the hardship program and the installment plan.
An offer in compromise is a way of negotiating with the IRS to settle for less tax debt than you owe.
Unlike the hardship program, taxpayers can’t just fill out a quick application online.
Signing up for the offer in compromise means a lot of communication with the IRS, and it’s typically a last resort.
“It requires a lot of documentation and a lot of back and forth with the IRS. These are typically larger dollars that people say, ‘I can’t even pay back in three years,’” Burnette said. “It’s tedious, it’s expensive and it can take years to settle.”
There’s also usually a fee associated with the offer in compromise program, and individuals may find it necessary to hire a tax expert to help them through the process.
But it can mean the difference between owing $100,000 and negotiating down to a $50,000 bill, so for those with a large amount of debt hanging over their head, the offer in compromise could be worth the trouble.
File, file, file!
No matter what your tax situation, though, the most important thing to remember is to file – even if you know you won’t be able to pay your taxes, experts told The Post.
“Absolutely the worst is to not file, because if you don’t file you’ll also have a failure to file penalty,” Sandberg told The Post. “Even if you have no money, even if you have no way to pay — file.”
Dealing with the IRS is a scary situation for most people. But individuals who know they can’t pay off their taxes should always contact the agency to try to work out a deal, since being proactive can help prevent the IRS from jumping to drastic measures, Sandberg said.
